SEMIANNUAL REPORT

SEMIANNUAL REPORT
Fiscal Period Ended May 31, 2016
Message from the Executive Director
Dear Fellow Unit Holders,
We are pleased to present our Semiannual Report for the fiscal period ended May 31, 2016.
Our financial performance remains strong. To illustrate, our operating revenue was 14,866
Our focused investment strategy and the strong fundamentals of both the Japanese
million yen, operating income was 7,288 million yen, ordinary income was 6,235 million
macroeconomic environment and the logistics real estate market have resulted yet
yen and net income was 6,255 million yen. From the previous period, our DPU grew by 1.6
again in excellent financial results. We are truly confident about, and proud of, our
percent to 4,006 million yen, including surplus cash distributions. Since our inception, on a
positive and consistent growth story.
stabilized basis excluding one-time effects from actual results, our DPU has grown by 24
percent, which reflects our robust external growth from property acquisitions and steady
Fourth Follow-on Offering and Acquisitions – NPR continues to receive strong sponsor
rent growth, as well as our stringent efforts to cut costs wherever possible.
support from the Prologis Group. In March 2016, we completed our fourth follow-on
offering and successfully raised 25.7 billion yen of capital. With the proceeds, we
The Japanese Logistics Real Estate Market — Japan’s logistics real estate market,
acquired four new Class-A properties – Prologis Park Osaka 5, Prologis Park Kitamoto,
especially in the Class-A segment, continues to be healthy. Because the country’s current
Prologis Park Joso and Prologis Park Sendai Izumi – from our sponsor. These state-of-
stock of modern logistics facilities is scarce, accounting for only 2 percent of the nation’s
the-art properties are in prime locations. As a result of the offering and acquisitions, we
entire distribution space, we believe the outlook for logistics real estate is bright. Demand
realized significant accretion of our distribution per unit (DPU) and our net asset value
from our customers is backed by the rapidly growing e-tailing sector and by conventional
(NAV) per unit. Our portfolio now has an estimated value of 447 billion yen, and our
retailers/manufacturers that are outsourcing more of their logistics functions to 3PL
liquidity has also increased. We are delighted to see such significant improvements to
companies to reduce operational costs. While we continue to anticipate significant volume
our unit holder value.
of new supply through 2017 in both the Tokyo and Osaka metropolitan areas, we believe
our leasing status will not be materially affected due to robust demand, the fundamental
Operational and Financial Highlights — Due to the competitive high quality of our
scarcity of space and our well-staggered lease expiration schedule. New supply is expected
Class-A portfolio and the improving Japanese macroeconomy, our operational status in
to be absorbed within a reasonable period of time, and we believe that high-quality
the fiscal period was significantly strong. We maintained a high average occupancy of
Japanese logistics real estate will perform well over the long term.
98 percent and our rents continued to grow. For the 236,000 square meters of leases
that were renewed or re-tenanted in the period, we achieved weighted average rent
growth of 3 percent on a nominal weighted average basis – this marks the seventh
period of consecutive growth since our inception. Capturing this momentum, we intend
to strive to accomplish at least 2 percent rent growth for leases that are scheduled to
expire over the next few years.
SEMIANNUAL REPORT
1
Message from the Executive Director
Strong Sponsor Support and Future Acquisitions — At the end of the fiscal period,
Looking Forward — We will endeavor to maximize our unit holder value by growing
we had exclusive negotiation rights for seven properties with an estimated value of
both externally and internally, and will continue to build a solid track record of
110 billion yen. These properties are currently under construction or in the lease-up
portfolio management. We sincerely appreciate your ongoing support of NPR and the
process. In addition, the Prologis Group is planning six new developments. As these
Prologis Group.
development assets are completed, leased and stabilized, they will be added to NPR’s
exclusive negotiation rights list. With these strong external growth opportunities,
we believe we will be able to continue to maximize our unit holder value. Accordingly,
Best regards,
we now have a mid-term portfolio growth target of approximately 600+ billion yen in
terms of acquisition value.
Masahiro Sakashita
Financial Strategies — By focusing our financial strategy on long-term stability and
Executive Director
efficiency, we have created and now maintain one of the strongest balance sheets in
Nippon Prologis REIT, Inc.
the J-REIT industry. At the end of the fiscal period, our loan-to-value ratio was
38.5 percent, and we intend to maintain this conservative level of leverage to secure
NPR’s strong balance sheet. Our term loans are provided by the leading lenders in
Japan and 95.5 percent of our loans have long-term fixed interest rates, which will help us
to mitigate future interest rate volatility risks; further to this, our debt maturities are
well-staggered to avoid refinancing risks. During the fiscal period, we successfully
completed the refinancing of a 23.3 billion yen bank loan and achieved a significant
reduction in interest rates while lengthening the duration of the loan. We are pleased to
be recognized by JCR for the strength of our balance sheet and commitment to a sound
capital structure. Accordingly, JCR has assigned us a high credit rating of AA (stable).
SEMIANNUAL REPORT
2
Financial Highlights for the Fiscal Period Ended May 31, 2016
Distribution Per Unit
(total JPY)
Operating Revenues
(JPY millions)
Net Income
(JPY millions)
4,006
14,866
6,255
Average Rent Growth
Period Average Occupancy
Credit Rating
Portfolio Size
(JPY millions)
+ 3.0%
98.0%
JCR AA
447,190
(Stable)
SEMIANNUAL REPORT
3
Loan-to-Value Ratio
38.5%
10%
8%
7%
Prologis Japan Company A
Investment
Highlights
Company B
Company C
Company D
Others
Earnings Stability from a Diversified Portfolio of Class-A Facilities
By Facility Type
Class-A Logistics
Facilities Developed
by Prologis Group
■ Multi-Tenant
19.0%
Focus on High-Quality Class-A Logistics Facilities
■ Build-to-Suit
81.0%
100%
By Geography
9.3%
Financial Strategy Focused on Long-Term Stability and Efficiency
■ Global Markets: Kanto and Kansai Areas
■ Regional Markets: Chubu, Kyushu and Tohoku Areas
90.7%
Focus on
Long-Term Stability
of Borrowings
Efficient Cash
Management
Period End LTV
38.5%
Full Sponsor Support from the Prologis Group*
Development
Shares
Advanced
Logistics
Properties
in Japan:
Prologis Group
is the of
leading
developer
of Class-A
Logistics
facilities in Japan.
Governance Structure Promotes Growth in Unit Holder Value
31%
30%
Prologis Investment
14%
10%
7%
Prologis Japan
Company A
Company B
Company C
15%
8%
Company D
Others
*As of December 31, 2015
SEMIANNUAL REPORT
4
Nippon Prologis REIT (NPR) Portfolio
M-01Prologis Park Ichikawa 1
JPY 33,900 mm
M-02 Prologis Park Zama 1
JPY 27,900 mm
M-03 Prologis Park Kawajima
JPY 25,600 mm
M-04 Prologis Park Osaka 2
JPY 25,000 mm
M-05 Prologis Park Maishima 3
JPY 13,500 mm
M-06 Prologis Park Kasugai
JPY 12,500 mm
M-07 Prologis Park Kitanagoya
JPY 6,500 mm
M-08 Prologis Park Tagajo
JPY 5,370 mm
M-09Prologis Park Tokyo-Ohta
JPY 29,500 mm
M-10 Prologis Park Zama 2
JPY 21,900 mm
M-11 Prologis Park Funabashi 5
JPY 11,000 mm
M-12 Prologis Park Narita 1-A&B
JPY 8,420 mm
M-13 Prologis Park Narita 1-C
JPY 4,810 mm
M-14 Prologis Park Amagasaki 1
JPY 17,600 mm
M-15 Prologis Park Amagasaki 2
JPY 19,200 mm
M-16 Prologis Park Tokyo-Shinkiba
JPY 13,600 mm
M-17 Prologis Park Yokohama-Tsurumi
JPY 13,800 mm
M-18 Prologis Park Osaka 4
JPY 21,000 mm
M-19 Prologis Park Iwanuma 1
JPY 5,670 mm
M-20 Prologis Park Kawajima 2
JPY 8,180 mm
M-21 Prologis Park Kitamoto
JPY 12,600mm
M-22 Prologis Park Joso
JPY 7,120mm
M-23 Prologis Park Osaka 5
JPY 17,600mm
B-01 Prologis Park Maishima 4
JPY 11,500 mm
B-02 Prologis Park Takatsuki
JPY 4,410 mm
B-03 Prologis Park Tosu 2
JPY 3,030 mm
B-04 Prologis Park Tosu 4
JPY 3,810 mm
B-05 Prologis Park Narashino 4
JPY 20,000 mm
B-06 Prologis Park Ebina
JPY 8,250 mm
B-07 Prologis Park Kawanishi
JPY 13,600 mm
B-08 Prologis Park Amagasaki 3
JPY 9,090 mm
B-09 Prologis Park Kobe
JPY 6,410 mm
B-10 Prologis Park Sendai Izumi
JPY 4,820mm
Note: As of May 31, 2016. Property values are based on acquisition price.
SEMIANNUAL REPORT
5
NPR Portfolio and Acquisition Pipeline
Kansai area
Kanto area
Exclusive Negotiation
Right Granted
Prologis Park Koga 1 (Under Development)
Tohoku Expressway
Prologis Park Koga 2 (Under Development)
Kan-etsu Expressway
Prologis Park Koga 3 (Future Development)
Prologis Park Kitamoto
Joban Expressway
Sakai-Koga IC
Exclusive Negotiation
Right Granted
Prologis Park Yoshimi
Hyogo
Shin-Meishin Expressway
Prologis Park Kyotanabe
Exclusive Negotiation
Right Granted
Prologis Park Kawajima
Prologis Park Kawajima 2
(Future Development)
Chugoku Expressway
San-yo Expressway
Prologis Park Kobe
Exclusive Negotiation
Right Granted
Prologis Park Joso
Kawajima IC
(Under Development)
Saitama
Prologis Park Takatsuki
Prologis Park Kawanishi
30km
OkegawaKitamoto IC
Tsukuba JCT
Ibaraki
Okegawa-Kanou IC
Prologis Park Ibaraki
40km
Joso IC
Exclusive Negotiation
Right Granted
Prologis Park Chiba New Town
Tokyo-gaikan
Expressway
(Under Development)
Prologis Park Narita 1-A & B
Prologis Park Narita 1-C
20km
Meishin Expressway
Prologis Park Kobe 2
10km
(Under Development)
Osaka
5km
Misato-Minami IC
50km
Dai-ni Keihin Expressway
Prologis Park Amagasaki 3
Metropolitan Inter‐City
Expressway
Osaka
Prologis Park Osaka 4
Daiei JCT
Prologis Park Funabashi 5
40km
Prologis Park Ichikawa 1
30km
16
Exclusive Negotiation
Right Granted
20km
Kinki Expressway
Tokyo
10km
Prologis Park Narashino 5
Tokyo
Chuo Expressway
Prologis Park Amagasaki 1
Prologis Park Amagasaki 2
Prologis Park Osaka 5
Nara
Prologis Park Osaka 2
Nishi-Meihan Expressway
SagamiharaAikawa IC
Prologis Park Narashino 4
Prologis Park Tokyo-Ohta
Prologis Park Ichikawa 3
(Future Development)
Ken-o-Atsugi IC
Prologis Park Tokyo-Shinkiba
Ebina JCT
Shin-Tomei Expressway
Hanshin Expressway Hanwa Expressway
Prologis Park Narita 1-D
Prologis Park Zama 1
Prologis Park Zama 2
Kanagawa
Prologis Park Maishima 3
Prologis Park Maishima 4
Exclusive Negotiation
Right Granted
Prologis Park Ebina 2
(Future Development)
Chiba
Prologis Park Yokohama-Tsurumi
Tateyama Expressway
Tomei Expressway
● Current assets
● Pipeline assets
SEMIANNUAL REPORT
6
Prologis Park Ebina
Yokohama-Yokosuka Road
Sponsor Support from the Prologis Group
Potential Acquisition Pipeline
Status
Region / Area
Property Name
Kanto
Exclusive Negotiation
Rights granted by
the Prologis Group
Kansai
Planned Assets
(
Kanto
Under Development /
Future Development
)
Kansai
Expected Completion Year
Property Type
Prologis Park Narita 1-D
2015
Multi-Tenant
28.192
Prologis Park Yoshimi
2015
Multi-Tenant
104,805
Prologis Park Narashino 5
2016
Multi-Tenant
58,928
Prologis Park Chiba New Town
2016
Multi-Tenant
109,980
Prologis Park Koga 1
2016
Build-to-Suit
35,720
Prologis Park Ibaraki
2016
Multi-Tenant
189,741
Prologis Park Kobe 2
2016
Build-to-Suit
68,364
Prologis Park Koga 2
2017
Build-to-Suit
21,914
Prologis Park Koga 3
TBD
Build-to-Suit
34,000
Prologis Park Ichikawa 3
TBD
Multi-Tenant
64,385
Prologis Park Ebina 2
2017
Build-to-Suit
38,000
Prologis Park Higashi Matsuyama
2017
Multi-Tenant
70,000
Prologis Park Kyotanabe
TBD
Multi-Tenant
156,000
Total
980,029
Note: Prologis expects to start JPY 40-60 billion in new development projects each year.
NPR does not have definite contracts to acquire the above properties. This property list should not be deemed a commitment or guarantee of NPR's future acquisitions.
Proven Development Track Record in Japan Since 2002
Gross floor area,
thousand sqm
5,000
Number of development projects
81
76
Multi-Tenant
Build-to-Suit
Number of development projects
4,000
50
3,000
54
56
58
63
67
80
70
60
38
2,000
40
25
16
1,000
1
5
20
8
0
0
2002
2003
2004
2005
2006
2007
GFA (sqm)
2008
2009
2010
2011
2012
2013
2014
2015
SEMIANNUAL REPORT
2016E
7
Focus on Class-A Logistics Facilities
Features:
Gross floor area of approximately 16,500 square meters or more
Proximity to population clusters and transportation hubs such as expressway interchanges and major airports or seaports
Large floor area exceeding approximately 5,000 square meters per level with a floor weight capacity of at least 1.5 tons/square meters, an effective ceiling height of
at least 5.5 meters and column spacing of at least 10 meters
Spiral ramps or slopes that allow trucks direct access to upper-floor distribution space
Safety features such as seismic isolation and earthquake-proofing
Spiral Rampways
Large Loading Zones
Wide-Column Spacing
Renewable Energy
Restaurant
Convenience Store
24-Hour Security
Seismic Isolators
SEMIANNUAL REPORT
8
Financial Strategy
Debt Maturity Schedule*
Debt Providers*
JPY, billions
40
JPY, billions
40
30
Short-term loans
Long-term loans
Short-term
loans
Bonds
Long-term loans
Bonds
30
20
Total Debt
Balance
Total Debt
JPY
176.8 bn
Balance
20
10
JPY 176.8 bn
10
0
2016
0
2016
2017
2017
2018
2018
2019
2019
2020
2020
2021
2021
2022
2022
2023
2023
2024
2024
2025
2025
*As of May 31, 2016
... 32.7%
■ Sumitomo Mitsui Banking Corporation
Bank
of
Tokyo-Mitsubishi
UFJ
... 25.9%
■
Sumitomo Mitsui Banking Corporation
... 32.7%
Mitsui Trust
Bank
... 12.8%
■ Sumitomo
Bank
of Tokyo-Mitsubishi
UFJ
... 25.9%
BankTrust Bank
... 8.4%
■ Mizuho
Sumitomo
Mitsui
... 12.8%
Mitsubishi
UFJ
Trust
&
Banking
Corporation
... 6.0%
■
Mizuho
Bank
... 8.4%
Development
Bank
of
Japan
... 5.3%
■
Mitsubishi UFJ Trust & Banking Corporation ... 6.0%
Bank
... 1.9%
■ The Norinchukin
Development
Bank of Japan
... 5.3%
Aozora BankBank
... 1.7%
■Norinchukin
The
... 1.9%
Resona
Bank
... 1.5%
■ Bank
Aozora
... 1.7%
Fukuoka
Bank
... 0.3%
■
Resona Bank
... 1.5%
... 0.1%
■ 77 Bank
Fukuoka
Bank
... 0.3%
Tokio Marine & Nichido Fire Insurance ... 0.1%
... 0.1%
77■
Bank
Mizuho
Trust
&
Banking
Corporation
... 0.1%
■ Marine & Nichido Fire Insurance
Tokio
... 0.1%
Insurance
... 0.1%
■ Nippon
Mizuho
Trust Life
& Banking
Corporation
... 0.1%
... 2.8%
■ Bonds
Nippon
Life Insurance
... 0.1%
■
■
■
■
■
■
■
■
■
■
■
■
■
■
■ Bonds
... 2.8%
Corporate Governance Investor-Aligned Fee Structure
Fee Type
1: NOI-based
Calculation
Payment Frequency
NOI × 7.5%
Asset Management Fee
Paid each fiscal period
2: Net Income-based
Acquisition Fee
Net income* × 6.0%
*Before deduction of net income-based asset management fee
1.00% of acquisition price
(0.50% for related-party transactions)
Paid each transaction
Disposition Fee
0.50% of disposition price
(0.25% for related-party transactions)
100% performance-linked asset management fee structure
SEMIANNUAL REPORT
9
Unit Holder Information (As of May 31, 2016)
Major Unit Holders
Unit Holder Composition
Units
Owned
Name
% of Units
Issued
■ Prologis Group: 277,990 units
■ Financial institutions: 801,875 units
15.1%
1
Prologis Property Japan SPC
275,990
14.98%
2
Japan Trustee Services Bank, Ltd. (Trust Acct.)
271,614
14.74%
3
The Master Trust Bank of Japan, Ltd. (Trust Acct.)
132,075
7.17%
4
Trust and Custody Services Bank, Ltd.
(Securities Investment Trust Acct.)
5
3.3% ■ Foreign entities and individuals: 666,624 units
■ Domestic individuals and others: 60,709 units
36.2%
■ Domestic entities: 34,752 units
1,841,950 Units
Issued and
Outstanding
43.5%
127,477
6.92%
NOMURA BANK (LUXEMBOURG) S. A.
67,927
3.68%
6
The Nomura Trust and Banking Company, Ltd. (Trust Acct.)
63,481
3.44%
7
STATE STREET BANK AND TRUST COMPANY
42,630
2.31%
8
STATE STREET BANK WEST CLIENTS-TREATY 505234
42,410
1.9%
2.30%
3.1%
1.8%
4.5%
■ Domestic individuals and others: 8,316 unit holders
■ Domestic entities: 283 unit holders
■ Financial institutions: 164 unit holders
9
10
THE BANK OF NEW YORK MELLON SA/NV 10
37,275
■ Foreign entities and individuals: 411 unit holders
2.02%
THE BANK OF NEW YORK, NON-TREATY JASDEC ACCOUNT
26,431
1.43%
Total
1,087,310
59.03%
SEMIANNUAL REPORT
9,174
Unit Holders
10
90.6%
Prologis Group’s Sustainability Initiatives
Environmental Stewardship
As a leading global provider of distribution facilities, the Prologis Group is fully committed to providing industry
leading energy-efficient buildings and delivering best-in-class projects that enable more efficient customer
operations and enhance local communities.
NPR Receives DBJ Green Building Certification
NPR received the Five Stars DBJ Green Building Certification, which is the highest of
five ranks, for three of its properties, Prologis Park Ichikawa 1, Prologis Park Zama 1
and Prologis Park Zama 2.
DBJ Green Building Certification is certified for real estate properties that meet
various stakeholders’ social requirements, such as high-quality environmental
design, security systems and disaster
prevention functions, on the scoring
model originally developed by DBJ.
This certification promotes the
expansion of green buildings, which are
essential to today’s real estate market.
Building Energy-Efficiency Labeling System
(BELS)
BELS is a system promoted by Japan’s Ministry of
Land, Infrastructure, Transport and Tourism (MLIT)
to assess the energy conservation performance of
buildings. NPR has obtained high ratings for four
buildings in its portfolio, including the highest
five-star rating “★★★★★.”
Awards for
Environmental Excellence
Prologis Park Zama 1
As a result of our collective efforts in promoting sustainability within our
portfolio and organization, NPR has been assessed as one of the most
prestigious entities with the highest social responsibility standards.
DBJ Green Building: five stars
CASBEE: Completion Class S
BELS: ★★★★★
Prologis Park Zama 2
Prologis Park Ichikawa 1
Prologis Park Osaka 5
DBJ Green Building: five stars
CASBEE: Completion Class S
BELS: ★★★★
DBJ Green Building: five stars
CASBEE: Completion Class S
BELS: ★★★★
CASBEE: Completion Class A
BELS: ★★★★★
SEMIANNUAL REPORT
11
Prologis Group’s Sustainability Initiatives
Social Responsibility
CSR activities
Support for local communities / Internship
programs for junior high-school students,
college students, etc.
Employee volunteerism is an important part of our culture. Impact Day, the
company’s global day of service, gives employees the opportunity to give back to
the communities we serve.
Since 2006, Prologis has been sponsoring Waseda University
Graduate School of Commerce’s “Logitics / SCM Course.”
Field trip for Elementary School students
at Prologis Park Zama
Logistics / SCM Course at Waseda University
Impact Day 2016 (Kitamoto, Saitama)
Support for the logistics
industry
Host family events
for customers and
neighborhoods
Support the museum which is the only
logistics museum in Japan
Prologis hosts events to help our
customers enhance workforce
culture and employee satisfaction,
and to build strong relationship
with local communities.
Volunteers at the Museum of Logistics
Summer festival at Prologis Park Ichikawa 1
SEMIANNUAL REPORT
12
Nippon Prologis REIT, Inc.
Nippon Prologis REIT, Inc.
Balance Sheets
Balance Sheets, continued
Thousands of yen
Thousands of yen
As of
As of
May 31, 2016
ASSETS
Current assets:
Cash and deposits (Notes 3 and 4)
Cash and deposits in trust (Notes 3 and 4)
Operating accounts receivable
Prepaid expenses
Deferred tax assets (Note 12)
Consumption taxes receivable
Other current assets
Total current assets
¥
Property and equipment (Note 6):
Buildings
Structures
Tools, furniture and fixtures
Land
Buildings in trust
Structures in trust
Machinery and equipment in trust
Tools, furniture and fixtures in trust
Other tangible assets in trust
Land in trust
Construction in progress in trust
Less: accumulated depreciation
Total property and equipment
Intangible assets (Note 6):
Other intangible assets in trust
Total intangible assets
Investments and other assets:
Long-term prepaid expenses
Security deposit
Organization expenses
Investment corporation bond issuance costs
Other
Total investments and other assets
Total Assets
¥
The accompanying notes are an integral part of these financial statements.
17,394,480
3,302,017
387,375
311,309
10
2,127,110
116
23,522,421
May 31, 2016
November 30, 2015
¥
19,648,024
3,331,121
371,612
242,193
24
30
23,593,006
7,549,209
249,739
5,434
3,834,204
254,388,011
5,119,786
11,267
478,782
35
180,810,277
5,071
(17,414,543)
435,037,275
7,549,209
249,739
5,434
3,834,204
224,517,935
4,270,648
11,267
426,245
35
168,427,926
(14,285,675)
395,006,969
3,718
3,718
3,636
3,636
900,333
10,000
23,077
21,834
400
955,644
459,519,060
734,904
10,000
31,222
23,744
400
800,271
419,403,883
¥
LIABILITIES
Current liabilities:
Operating accounts payable
Short-term loans payable (Notes 4 and 10)
Current portion of long-term loans payable
¥
(Notes 4, 5 and 10)
Accounts payable
Accrued expenses
Accrued consumption taxes
Income taxes payable
Advances received
Other current liabilities
Total current liabilities
November 30, 2015
856,555
7,000,000
¥
1,215,677
-
-
23,300,000
431,428
1,426,504
499
2,609,893
505,030
12,829,913
260,081
1,357,709
269,146
715
2,416,256
83,648
28,903,236
5,000,000
164,800,000
247,773
5,000,000
133,900,000
247,773
11,403,825
10,445,198
1,066
181,452,665
194,282,579
732
149,593,703
178,496,940
258,979,782
234,918,722
6,256,697
265,236,480
265,236,480
5,988,220
240,906,942
240,906,942
Non-current liabilities:
Investment corporation bonds payable
(Notes 4 and 11)
Long-term loans payable (Notes 4, 5 and 10)
Tenant leasehold and security deposits (Note 4)
Tenant leasehold and security deposits in trust
(Note 4)
Other non-current liabilities
Total non-current liabilities
Total Liabilities
NET ASSETS (Note 9)
Unit holders’ equity
Unit holders’ capital
Units authorized:
10,000,000 units as of May 31, 2016 and
November 30, 2015
Units issued and outstanding:
1,841,950 units as of May 31, 2016 and
1,730,750 units as of November 30, 2015
Surplus
Retained earnings
Total unit holders’ equity
Total Net Assets
Total Liabilities and Net Assets
¥
459,519,060
¥
419,403,883
The accompanying notes are an integral part of these financial statements.
13
SEMIANNUAL REPORT
SEMIANNUAL REPORT
14
Nippon Prologis REIT, Inc.
Nippon Prologis REIT, Inc.
Statements of Income
Statements of Changes in Net Assets
For the six-month periods ended May 31, 2016 and November 30, 2015
Thousands of yen
For the six-month periods ended
Operating Revenues (Note 7):
Operating rental revenues
Other rental revenues
Total operating revenues
Operating Expenses (Notes 6 and 7):
Expenses related to property rental business
Asset management fee
Asset custody fee
Directors’ compensation
Audit fee
Other operating expenses
Total operating expenses
Operating income
Non-operating Income:
Interest income
Refund of real estate taxes and other
Gain on donation of fixed assets
Total non-operating income
Non-operating Expenses:
Interest expense on loans payable
Interest expense on investment corporation bonds
Amortization of organization expenses
Amortization of investment corporation bond
issuance costs
Borrowing related expenses
Investment unit issuance expenses
Offering costs associated with the issuance of
investment units
Others
Total non-operating expenses
Ordinary income
Extraordinary income:
Subsidy income
Total extraordinary income
Income before income taxes
Incomes taxes - current (Note 12)
Incomes taxes - deferred (Note 12)
Total income taxes
Net income
Retained earnings brought forward
Retained earnings at end of period
May 31, 2016
¥
November 30, 2015
13,849,474
1,017,058
14,866,532
¥
Thousands of yen
¥
13,181,769
1,151,196
14,332,966
6,189,427
1,284,792
37,091
4,800
15,000
46,633
7,577,744
7,288,788
6,075,774
1,221,716
35,796
4,800
15,000
35,755
7,388,843
6,944,123
2,101
7,013
9,115
1,907
4,403
6,311
783,235
17,424
8,145
791,888
17,235
8,145
1,910
1,910
147,622
27,098
143,017
-
77,129
-
81
1,062,647
6,235,256
28
962,224
5,988,210
20,720
20,720
6,255,976
821
13
835
6,255,141
1,556
6,256,697
5,988,210
1,103
0
1,104
5,987,106
1,114
5,988,220
¥
Balance as of May 31, 2015 (Note 9)
Number
of units
Unit holders’
capital
1,730,750
¥ 235,915,634
¥ 5,788,742 ¥ 241,704,376
(996,912)
(996,912)
Distributions in excess of retained earnings
Distributions of retained earnings
Net income
Balance as of November 30, 2015 (Note 9)
Issuance of new units on March 14, 2016
and April 13, 2016
Total net
assets
(5,787,628)
(5,787,628)
5,987,106
5,987,106
¥5,988,220
¥240,906,942
1,730,750
¥234,918,722
111,200
24,897,012
24,897,012
(835,952)
(835,952)
Distributions in excess of retained earnings
Distributions of retained earnings
Net income
Balance as of May 31, 2016 (Note 9)
Retained
earnings
1,841,950
¥258,979,782
(5,986,664)
(5,986,664)
6,255,141
6,255,141
¥6,256,697
¥265,236,480
The accompanying notes are an integral part of these financial statements.
Yen
For the six-month periods ended
Net income per unit (Note 13)
May 31, 2016
¥
3,518
November 30, 2015
¥
3,459
The accompanying notes are an integral part of these financial statements.
15
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16
Nippon Prologis REIT, Inc.
Nippon Prologis REIT, Inc.
Statements of Cash Flows
Notes to Financial Statements
For the six-month periods ended May 31, 2016 and November 30, 2015
Thousands of yen
For the six-month periods ended
Cash Flows from Operating Activities:
Income before income taxes
Depreciation (Note 6)
Amortization of organization expenses
Amortization of investment corporation bond issuance costs
Investment unit issuance expenses
Interest income
Interest expense
Decrease (increase) in operating accounts receivable
Decrease (increase) in consumption taxes receivable
Decrease (increase) in prepaid expenses
Decrease (increase) in long-term prepaid expenses
Increase (decrease) in operating accounts payable
Increase (decrease) in accounts payable
Increase (decrease) in accrued expenses
Increase (decrease) in accrued consumption taxes
Increase (decrease) in advances received
Others, net
Subtotal
Interest received
Interest paid
Income taxes paid
Net cash provided by operating activities
Cash Flows from Investing Activities:
Purchases of property and equipment
Purchases of property and equipment in trust
Purchases of intangible assets in trust
Proceeds from tenant leasehold and security deposits in trust
Repayments of tenant leasehold and security deposits in trust
Net cash provided by (used in) investing activities
Cash Flows from Financing Activities:
Proceeds from short-term loans payable
Proceeds from long-term loans payable
Repayments of long-term loans payable
Proceeds from issuance of new investment units
Payment of distributions of retained earnings
Payment of distributions in excess of retained earnings
Net cash provided by (used in) financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of period
Cash and cash equivalents at the end of period (Note 3)
May 31, 2016
¥
¥
The accompanying notes are an integral part of these financial statements.
6,255,976
3,129,190
8,145
1,910
27,098
(2,101)
800,660
(15,763)
(2,127,110)
(69,116)
(165,428)
(359,476)
18,963
68,781
(269,146)
193,636
266,584
7,762,803
2,101
(800,647)
(1,037)
6,963,219
November 30, 2015
¥
5,988,210
2,935,990
8,145
1,910
(1,907)
809,123
(110,312)
52,367
109,210
383,508
3,353
14,268
(591,758)
23,317
702
9,626,130
1,907
(817,873)
(1,221)
8,808,942
1.
Organization and Basis of Presentation
a)
Organization
Nippon Prologis REIT, Inc. (“NPR”) was established on November 7, 2012 under the “Act on
Investment Trust and Investment Corporation” (hereinafter the “Investment Trust Law”), and was
listed on the REIT Securities Market of the Tokyo Stock Exchange on February 14, 2013, with the
Prologis Group (*), the leading global owner, operator and developer of logistics facilities, acting as
a sponsor. NPR primarily focuses on investing in logistics facilities, especially in high quality ClassA logistics facilities (logistics properties that meet the demands of tenant logistics companies and
their customer facility users with respect to operational efficiency, and fulfill certain criteria with
respect to size, location, state-of-the-art equipment, convenience and safety), and attempts to
maximize its unit holder value through achieving stability in rental revenues, steady growth in the
size of its portfolio and optimization of the value of its portfolio. NPR is externally managed by a
licensed asset management company, Prologis REIT Management K.K. (hereinafter the “Asset
Manager”).
On February 13, 2013, NPR issued 182,350 new units through a public offering and raised
approximately 96,882 million yen. Those units are listed on the J-REIT section of the Tokyo Stock
Exchange.
NPR acquired 12 properties (aggregate acquisition price: 173,020 million yen) on February 15,
2013, following its listing, and acquired 17 properties (aggregate acquisition price: 232,030 million
yen) during the second, third and fourth fiscal periods. NPR acquired four additional properties
(5,220)
(42,993,804)
(1,599)
1,279,367
(172,707)
(41,893,964)
(759)
(438,204)
340,689
(329,016)
(427,290)
(aggregate acquisition price: 42,140 million yen) during the reporting fiscal period. As a result, NPR
7,000,000
61,900,000
(54,300,000)
24,869,914
(5,985,948)
(835,869)
32,648,096
(2,282,648)
22,979,146
20,696,498
(5,787,023)
(996,772)
(6,783,795)
1,597,856
21,381,289
22,979,146
than majority. The global parent company Prologis, Inc. is a real estate investment trust
¥
owned 33 properties (aggregate acquisition price: 447,190 million yen) as of the end of the
reporting fiscal period.
(*) The Prologis Group is defined as a group of Prologis, Inc., the world headquarters, and its
group affiliates, which include ProLogis K.K., a Japanese subsidiary, and various special
purpose vehicles of joint ventures where the ownership of the Prologis Group may be less
headquartered in the United States of America and listed on the New York Stock Exchange.
b) Basis of Presentation
The accompanying financial statements have been prepared in accordance with the provisions
set forth in the Investment Trust Law, the Japanese Financial Instruments and Exchange Act and
their related accounting regulations, and in conformity with accounting principles generally
accepted in Japan (hereinafter the “Japanese GAAP”), which are different in certain respects as to
application and disclosure requirements from International Financial Reporting Standards.
The accompanying financial statements have been reformatted and translated into English from
the financial statements of NPR prepared in accordance with Japanese GAAP, and filed with the
appropriate Local Finance Bureau of the Ministry of Finance as required by the Financial
Instruments and Exchange Act. In preparing these financial statements, certain reclassifications
and modifications have been made to the financial statements issued domestically in order to
present them in a format which is more familiar to readers outside Japan.
As permitted by the regulations under the Financial Instruments and Exchange Act of Japan,
17
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18
Nippon Prologis REIT, Inc.
Nippon Prologis REIT, Inc.
amounts of less than one thousand yen have been omitted. As a result, the totals shown in the
2.
Summary of Significant Accounting Policies
accompanying financial statements do not necessarily agree with the sums of the individual
a)
Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand and cash in trust, floating deposits, deposits
amounts.
in trust and short-term investments that are very liquid and realizable with a maturity of three
The fiscal period of NPR represents two six-month accounting periods: each period is from June
months or less when purchased, and that are subject to insignificant risks of changes in value.
1 to November 30 or, from December 1 to May 31 of the following year.
b) Property and Equipment
Property and equipment are stated at cost, which includes the original purchase price and related
acquisition costs and expenses. Depreciation of property and equipment, including property and
equipment in trust, is calculated by the straight-line method over the estimated useful lives as
follows:
c)
Buildings
3-66 years
Structures
2-60 years
Machinery and equipment
17 years
Tools, furniture and fixtures
2-18 years
Taxes on Property and Equipment
With respect to property taxes, city planning taxes and depreciable asset taxes, of the tax amount
assessed and determined, the amount corresponding to the relevant fiscal period is accounted for
as rental expenses.
Of the amounts paid for the acquisitions of real estate properties or beneficiary rights in trust of
real estate, the amount equivalent to property taxes is capitalized as part of the acquisition cost of
the relevant property instead of being charged as expenses. Capitalized property taxes amounted
to 211,359 thousand yen for the fiscal period ended May 31, 2016. Also, it was not applicable for
the six-month period ended November 30, 2015.
d) Investment Unit Issuance Expenses
The full amount of investment unit issuance expenses is recorded as expenses at the time of
expenditure.
e)
Organization Expenses
All organization expenses are amortized using the straight-line method over five years.
f)
Investment corporation bond issuance costs
Investment corporation bond issuance costs are amortized using the straight-line method over
the respective terms of the bonds.
g)
Hedge Accounting
NPR enters into derivative transactions in order to hedge against risks defined in its Articles of
Incorporation and in compliance with their general risk management policy, NPR uses interest rate
swaps for the purpose of hedging its risk exposure associated with interests on variable rate loans
payable. Where deferral accounting is generally adopted for hedge transactions, NPR applies the
special accounting treatment to interest rate swaps which qualify for hedge accounting and meet
the specific matching criteria. Under the special accounting treatment, interest rate swaps are not
19
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20
Nippon Prologis REIT, Inc.
measured at fair value, but the differential paid or received under the swap agreements is
recognized and included in interest expense or income, respectively.
Assessment of the hedge effectiveness has been omitted since all interest rate swaps meet the
Nippon Prologis REIT, Inc.
3.
Cash and Cash Equivalents
The relationship between cash and cash equivalents in the statements of cash flows and accounts
and amounts in the accompanying balance sheets is as follows:
specific matching criteria under the special accounting treatment.
Thousands of yen
As of
h) Beneficiary Rights in Trust
May 31, 2016
As to beneficiary rights in trust, all accounts of assets and liabilities for assets in trust as well as
the related income generated and expenses incurred are recorded in the relevant balance sheet
Cash and deposits
and statement of income accounts.
Cash and deposits in trust
Cash and cash equivalents
i)
¥
17,394,480
November 30, 2015
¥
3,302,017
¥
20,696,498
19,648,024
3,331,121
¥
22,979,146
Consumption Taxes
Transactions subject to consumption taxes are recorded at amounts exclusive of consumption
taxes. Net payable to, or receivable from tax authorities is recognized as consumption taxes
payable or receivable on the balance sheet, and net movement is treated as operating cash flows
in the statement of cash flows.
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22
Nippon Prologis REIT, Inc.
Nippon Prologis REIT, Inc.
4.
Financial Instruments
b) Estimated Fair Value of Financial Instruments
a)
Detailed Information on Financial Instruments
(i) Policy for Financial Instruments
NPR procures funds for acquisition of assets through issuance of new investment units, bank
The book value, fair value and differences between the values as of May 31, 2016 and November
30, 2015 are as follows. Financial instruments for which the fair value is difficult to estimate are
excluded from the following table (see Note 2 below).
loans and issuance of investment corporation bonds.
Thousands of yen
NPR generally invests surplus funds in bank deposits, considering the safety and liquidity of the
As of May 31, 2016
investment and also reflecting the market environment and cash positions of NPR itself.
NPR enters into derivative transactions solely for the purposes of reducing risks of rising interest
rates related to financings and other types of risks. NPR does not use derivative transactions for
speculative purposes.
Book value
Fair value
¥ 17,394,480
¥ 17,394,480
3,302,017
3,302,017
¥ 20,696,498
¥ 20,696,498
(3) Short-term loans payable
7,000,000
7,000,000
-
(5) Investment corporation bonds payable
5,000,000
5,162,300
162,300
164,800,000
167,870,392
3,070,392
¥ 176,800,000
¥ 180,032,692
¥
3,232,692
¥
¥
¥
-
(1) Cash and deposits
(2) Cash and deposits in trust
Total assets
(ii) Financial Instruments, their Risks and Risk Management System
Bank deposits are used for investment of surplus funds. These deposits are exposed to credit
risks, such as bankruptcy of depository financial institutions, but such credit risks are limited and
carefully controlled by using only short-term deposits in financial institutions with high credit
ratings, fully considering the market environment and NPR’s cash flow status.
Bank loans and investment corporation bonds are mainly made to procure funds for acquisition
(6) Long-term loans payable
Total liabilities
(7) Derivative transactions
-
Difference
¥
-
¥
-
-
of properties, repayment of bank loans and redemption of investment corporation bonds.
Although NPR is exposed to liquidity risks upon repayment and redemption, by diversifying the
Thousands of yen
maturities and lending institutions, setting up commitment line agreements, securing liquidity of
As of November 30, 2015
cash in hand and managing such liquidity risks by preparing and monitoring cash flows projection,
Book value
Fair value
¥ 19,648,024
¥ 19,648,024
3,331,121
3,331,121
¥ 22,979,146
¥ 22,979,146
23,300,000
23,297,065
(2,934)
5,000,000
5,049,100
49,100
133,900,000
136,732,905
2,832,905
¥ 162,200,000
¥ 165,079,071
¥
2,879,071
¥
¥
¥
-
such risks are maintained under control.
In addition, some loans bear floating interest rates and are exposed to potential risks of rising
interest rates. NPR attempts to mitigate such risks on its operations by maintaining a conservative
loan to value ratio and increasing the ratio of long-term fixed interest rate loans.
(iii) Supplemental Explanation Regarding Fair Values of Financial Instruments
The fair value of financial instruments is based on their observable market value, if available.
(1) Cash and deposits
(2) Cash and deposits in trust
Total assets
(4) Current portion of long-term loans payable
(5) Investment corporation bonds payable
When there is no observable market value available, fair value is based on a price that is reasonably
(6) Long-term loans payable
estimated. Since various factors are reflected in estimating the fair value, different assumptions
Total liabilities
and factors could result in a different value.
(7) Derivative transactions
-
Difference
-
¥
-
¥
-
(Note 1) Methods to estimate fair values of financial instruments
(1) Cash and deposits and (2) Cash and deposits in trust
Due to the short maturities, the book value of these instruments is deemed a reasonable
approximation of the fair value, and therefore, the book value is used as the fair value.
(3) Short-term loans payable
Due to the short maturities, the book value of these instruments is deemed a reasonable
approximation of the fair value, and therefore, the book value is used as the fair value.
(4) Current portion of long-term loans payable and (6) Long-term loans payable
The fair value of long-term loans payable is determined based on the present value of
contractual cash flows which would be applicable to new loans payable under the same
conditions and terms.
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24
Nippon Prologis REIT, Inc.
Nippon Prologis REIT, Inc.
(5) Investment corporation bonds payable
(Note 4) Repayment schedule for long-term loans payable and other interest-bearing debt after May 31, 2016
The reference statistical prices disclosed by the Japan Securities Dealers Association are used as
Thousands of yen
the fair value.
As of May 31, 2016
Due after
Due after
Due after
one to two two to three three to
years
years
four years
(7) Derivative transactions
Please refer to Note 5, “Derivative Transactions”.
Investment corporation bonds
payable
Due within
one year
¥
Long-term loans payable
(Note 2) Financial instruments for which fair value is extremely difficult to estimate
As tenant leasehold and security deposits and tenant leasehold and security deposits in trust have
Total
no observable and available market price, and it is impracticable to reasonably estimate their future
cash flows, their fair value is not disclosed.
- ¥
-
- ¥
25,300,000
Due after
four to five
years
- ¥ 2,000,000 ¥
6,400,000 48,300,000
Due after
five years
-
¥ 3,000,000
7,300,000
77,500,000
¥23,300,00- ¥25,300,000 ¥6,400,000 ¥50,300,000 ¥7,300,000 ¥80,500,000
Repayment schedule for long-term loans payable and other interest-bearing debt after November 30, 2015
Thousands of yen
Thousands of yen
As of November 30, 2015
Due after
Due after
Due after
Due after
one to two two to three three to
four to five
years
years
four years
years
As of
May 31, 2016
Tenant leasehold and security deposits
¥
Tenant leasehold and security deposits in trust
November 30, 2015
247,773
¥
11,403,825
247,773
Investment corporation bonds
payable
10,445,198
Long-term loans payable
(Note 3) Redemption schedule for monetary claims after May 31, 2016
Total
Due within
one year
¥
- ¥
23,300,000
¥23,300,000
- ¥
- ¥ 2,000,000 ¥
Due after
five years
-
¥ 3,000,000
2,000,000 23,300,000 31,400,000 23,300,000
53,900,000
¥2,000,000 ¥23,300,000 ¥33,400,000 ¥23,300,000 ¥56,900,000
Thousands of yen
Due within
one year
Cash and deposits
Cash and deposits in trust
Total
¥17,394,480
As of May 31, 2016
Due after
Due after
Due after
one to two two to three three to
years
years
four years
¥
3,302,017
¥20,696,498
-
¥
¥
-
-
¥
¥
-
Due after
four to five
years
-
¥
¥
-
Due after
five years
-
¥
¥
-
-
¥
-
Redemption schedule for monetary claims after November 30, 2015
Thousands of yen
Due within
one year
Cash and deposits
Cash and deposits in trust
Total
25
SEMIANNUAL REPORT
¥19,648,024
As of November 30, 2015
Due after
Due after
Due after
Due after
one to two two to three three to
four to five
years
years
four years
years
¥
3,331,121
¥22,979,146
-
¥
¥
-
-
¥
¥
-
-
¥
¥
-
Due after
five years
-
¥
¥
-
-
¥
-
SEMIANNUAL REPORT
26
Nippon Prologis REIT, Inc.
Nippon Prologis REIT, Inc.
5.
6.
Derivative Transactions
For the six-month periods ended May 31, 2016 and November 30, 2015, NPR only utilized interest rate
swaps which qualified for hedge accounting and met the special matching criteria, as described below.
Investment and Rental Properties
NPR owns logistics facilities for leasing for the purpose of earning rental income. The book value,
changes during the reporting fiscal period and fair value of the properties are as follows:
Thousands of yen
Thousands of yen
For the six-month periods ended
As of May 31, 2016
May 31, 2016
Contract amount
Due after
Fair
Type of derivative
Primary
Fair value
Total
transaction
hedged item
one year
value
measurement
Interest rate
Special treatment
swaps
Long-term
for interest rate
¥163,800,000 ¥163,800,000 (Note)
(Note)
Receive floating /
loans payable
swaps
Pay fix
(Note) Interest rate swaps under the special accounting treatment are accounted for as the integral part of long-term
Hedge accounting
method
November 30, 2015
Book value
Balance at the beginning of the period
¥
Changes during the period (Note 2)
Balance at the end of the period
Fair value at the end of the period
395,010,605
¥
40,030,387
397,443,542
(2,432,936)
¥
435,040,993
¥
395,010,605
¥
506,620,000
¥
448,320,000
loans payable designated as hedged items. Therefore, their fair value is included in long-term loans payable
(Note 1) Book value is calculated by deducting accumulated depreciation from acquisition cost.
disclosed in the aforementioned Note 4, “Financial Instruments, b) Estimated Fair Value of Financial
(Note 2) The increase for the fiscal period ended May 31, 2016 was primarily a result of acquiring four
properties during the period (Prologis Park Kitamoto, Prologis Park Joso, Prologis Park Osaka5 and
Instruments, (6) Long-term loans payable”.
Prologis Park Sendai Izumi) for a total of 42,647,349 thousand yen, offset by depreciation of
Thousands of yen
As of November 30, 2015
Contract amount
Due after
Type of derivative
Primary
Fair
Fair value
Total
one year
transaction
hedged item
value
measurement
Interest rate
Special treatment
swaps
Long-term
for interest rate
¥156,200,000 ¥132,900,000 (Note)
(Note)
Receive floating /
loans payable
swaps
Pay fix
(Note) Interest rate swaps under the special accounting treatment are accounted for as the integral part of long-term
Hedge accounting
method
3,129,190 thousand yen.
The decrease for the fiscal period ended November 30, 2015 was a result of the recognition of
depreciation of 2,935,990 thousand yen.
(Note 3) The fair value as of the end of the reporting period is determined based on appraised value
provided by independent real estate appraisers.
loans payable designated as hedged items. Therefore, their fair value is included in long-term loans payable
disclosed in the aforementioned Note 4, “Financial Instruments, b) Estimated Fair Value of Financial
Instruments, (4) Current portion of long-term loans payable and (6) Long-term loans payable”.
27
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28
Nippon Prologis REIT, Inc.
Nippon Prologis REIT, Inc.
7.
8.
Property-related Revenues and Expenses
The following table summarizes the revenues and expenses generated from property leasing activities
Thousands of yen
Thousands of yen
For the six-month periods ended
As of
May 31, 2016
29
SEMIANNUAL REPORT
The future minimum rental revenues from tenants subsequent to each fiscal period end under noncancelable operating leases of properties are as follows:
for the six-month periods ended May 31, 2016 and November 30, 2015.
(1) Property-related revenues
Rental revenues
Rental revenues
Common area charges
Total
Other rental revenues
Received utilities cost
Others
Total
Total property-related revenues
(2) Property-related expenses
Rental expenses
Subcontract expenses
Utilities cost
Taxes and public dues
Non-life insurance premium
Repair and maintenance
Depreciation
Custodian fee
Other expenses
Total rental expenses
(3) Operating income from property leasing ( (1)-(2) )
Leases
November 30, 2015
May 31, 2016
Due within one year
¥
Due after one year
¥
¥
¥
¥
¥
¥
¥
¥
12,989,562
859,912
13,849,474
¥ 12,390,334
791,434
¥ 13,181,769
834,397
182,661
1,017,058
14,866,532
¥
786,734
814,386
1,255,014
24,941
161,659
3,129,190
14,730
2,769
6,189,427
8,677,105
Total
26,277,434
November 30, 2015
¥
82,788,757
¥
109,066,192
23,935,998
74,214,688
¥
98,150,687
954,600
196,596
¥ 1,151,196
¥ 14,332,966
¥
¥
¥
747,337
955,454
1,248,122
23,813
148,516
2,935,990
13,770
2,769
6,075,774
8,257,192
SEMIANNUAL REPORT
30
Nippon Prologis REIT, Inc.
9.
a)
Nippon Prologis REIT, Inc.
Net Assets
for the six-month periods ended May 31, 2016 and November 30, 2015, respectively. These amounts
Stated Capital
were equivalent to the maximum integral multiples of number of investment units issued and
NPR issues only non-par value units in accordance with the Act on Investment Trusts and
Investment Corporations of Japan, and all issue amounts of new units are designated as stated
capital. NPR maintains at least 50,000 thousand yen as the minimum net assets required by Article
67, Paragraph 4 of the Act on Investment Trusts and Investment Corporations.
outstanding as of the end of each fiscal period.
Based on the distribution policy as defined in Article 39, Paragraph 2 of Articles of Incorporation, NPR
shall make Surplus Cash Distributions (SCD), defined as distributions in excess of retained earnings, as a
return of unit holders’ capital, each fiscal period on a continuous basis.
Accordingly, NPR declared SCD of 891,503,800 yen and 835,952,250 yen, as a return of unit holders’
capital, which was the amount equivalent to approximately 28.5% of depreciation expense of
b) Unit holders’ capital
Unit holders’ capital as of May 31, 2016 and November 30, 2015 consists of the following items:
assessment of temporary earnings dilution of 126 yen per unit as a result of certain financing activities
As of
Unit holders’ capital, gross
¥
November 30, 2015
263,424,563
¥
respectively.
In addition, NPR made a One-time Surplus Cash Distributions of 232,085,700 yen based on an
Thousands of yen
May 31, 2016
3,129,190,780 yen and 2,935,990,820 yen for the periods ended May 31, 2016 and November 30, 2015,
for the period ended May 31, 2016.
238,527,550
Deduction from unit holders’ capital;
Accumulated distribution in excess of retained
earnings
Unit holders’ capital
c)
(4,444,780)
¥
(3,608,828)
258,979,782
¥
234,918,722
Distributions
Distributions related to each period but declared and paid after the balance sheet date are
summarized as follows:
Yen
For the six-month periods ended
May 31, 2016
Total
I
II
Unappropriated retained earnings
Distributions in excess of retained
earnings
Total
¥ 5,988,220,742
1,123,589,500
835,952,250
Per unit
Distributions
Distributions of retained earnings
Distributions in excess of retained
earnings
Total distributions
IV
Per unit
¥ 6,256,697,961
Deduction from unit holders’ capital
III
November 30, 2015
Retained earnings carried forward
¥
6,255,262,200
¥3,396
1,123,589,500
610
7,378,851,700
¥4,006
1,435,761
5,986,664,250 ¥ 3,459
835,952,250
483
6,822,616,500 ¥ 3,942
¥
1,556,492
Pursuant to the “Policy on the Distribution of Funds” as defined in Article 39, Paragraph 1, Item 2 of
Articles of Incorporation, the amount of distributions shall be the amount which does not exceed the
amount of profits but exceeds 90% of the distributable profit as defined in Article 67-15 of the Special
Taxation Measures Act.
Based on the policy, NPR declared distribution amounts of 6,255,262,200 yen and 5,986,664,250 yen
31
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32
Nippon Prologis REIT, Inc.
Nippon Prologis REIT, Inc.
NPR is in the contract of commitment line agreement with two banks.
10. Short-Term and Long-term Loans Payable
Thousands of yen
Short-term and long-term loans payable consisted of bank borrowings under loan agreements. The
As of
following table summarizes the long-term loans payable as of May 31, 2016 and November 31, 2015.
May 31, 2016
Thousands of yen
Total amount of committed line of credit
As of
May 31, 2016
0.23389% unsecured short-term loans
¥
0.23389% unsecured short-term loans
November 30, 2015
4,900,000
¥
2,100,000
Total short-term loans payable
0.55634% unsecured long-term loans due 2016(*)
-
¥
7,000,000
¥
-
¥
-
¥
23,300,000
23,300,000
23,300,000
(*)
23,300,000
23,300,000
1.32075% unsecured long-term loans due 2022(*)
6,000,000
6,000,000
(*)
2,000,000
2,000,000
1.18135% unsecured long-term loans due 2019(*)
24,000,000
24,000,000
(*)
13,900,000
13,900,000
1.34550% unsecured long-term loans due 2021(*)
20,000,000
20,000,000
(*)
6,400,000
6,400,000
0.84350% unsecured long-term loans due 2017
1.83625% unsecured long-term loans due 2023
0.81010% unsecured long-term loans due 2018
0.37526% unsecured long-term loans due 2019
1,000,000
1,000,000
(*)
10,000,000
10,000,000
0.57490% unsecured long-term loans due 2022(*)
4,000,000
4,000,000
(*)
7,300,000
-
0.17260% unsecured long-term loans due 2022(*)
6,000,000
-
(*)
10,000,000
-
0.26513% unsecured long-term loans due 2018(*)(**)
-
-
(*)(**)
-
-
7,600,000
-
-
(23,300,000)
164,800,000
¥ 133,900,000
0.57490% unsecured long-term loans due 2022
0.07570% unsecured long-term loans due 2021
0.39000% unsecured long-term loans due 2024
0.26513% unsecured long-term loans due 2018
0.41290% unsecured long-term loans due 2023(*)
Less: current portion
Total long-term loans payable, less current portion
¥
Borrowings drawn down
Balance of unused committed line of credit
8,000,000
¥
¥
8,000,000
8,000,000
-
¥
8,000,000
-
0.73760% unsecured long-term loans due 2018(*)
1.01950% unsecured long-term loans due 2020
¥
November 30, 2015
The stated interest rate is the weighted average interest rate during the period ended May 31, 2016.
For certain loans (*) for which NPR uses interest rate swaps to hedge their interest rate risk exposure, the
effective interest rate which includes the effect of the interest rate swap is stated. The loans(**) from
Sumitomo Mitsui Banking Corporation and The Bank of Tokyo-Mitsubishi UFJ, Ltd., with the principal
amount of 21,700,000 thousand yen and 9,300,000 thousand yen, respectively, were prepaid with the net
proceeds from the offerings on March 15, 2016.
The redemption schedules for long-term loans subsequent to May 31, 2016 and November 30, 2015 are
disclosed in Note 4, “Financial Instruments.”
33
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34
Nippon Prologis REIT, Inc.
Nippon Prologis REIT, Inc.
11. Investment Corporation Bonds Payable
12. Income Taxes
The investment corporation bonds payable would be redeemed on a lump-sum basis at their contractual
NPR is subject to Japanese corporate income taxes on its taxable income. The tax effects of temporary
maturity dates. The following table summarizes the investment corporation bonds payable as of May 31,
differences that give rise to a significant portion of the deferred tax assets and liabilities as of May 31,
2016 and November 30, 2015.
2016 and November 30, 2015 were as follows:
Interest
Issued date Maturity date
rate
November 27, November 27,
1st unsecured bond 2014
2019
0.338%
November 27, November 27,
2nd unsecured bond 2014
2024
0.930%
Total
Thousands of yen
Thousands of yen
As of
As of
May 31, 2016
¥
2,000,000
November 30, 2015
¥
3,000,000
¥
5,000,000
2,000,000
3,000,000
¥
5,000,000
May 31, 2016
Enterprise tax payable
¥
Total deferred tax assets
November 30, 2015
10
¥
10
Net deferred tax assets
¥
10
24
24
¥
24
Reconciliations of major items that caused differences between the statutory tax rate and effective tax
rate with respect to pre-tax income reflected in the accompanying statement of income for the six-month
periods ended May 31, 2016 and November 30, 2015 are as follows:
For the six-month periods ended
May 31, 2016
Statutory tax rate
November 30, 2015
32.31%
32.31%
(32.31%)
(32.30%)
Other
0.01%
0.01%
Actual effective income tax rate
0.01%
0.02%
Adjustments:
Deductible cash distributions
NPR has a policy of making cash distributions of earnings in excess of 90% of distributable income as
defined in the Special Taxation Measures Act for the fiscal period to qualify for conditions, as set forth in
the Special Taxation Measures Act, to achieve a deduction of cash distributions for income tax purposes.
Based on this policy, NPR treated the cash distributions of earnings as a tax deductible distribution as
defined in the Special Taxation Measures Act.
The Act on Partial Revision of the Income Tax Act, etc. (Act No. 15 of 2016) and the Act on Partial Revision
of the Local Tax Act, etc. (Act No. 13 of 2016) were passed by the Diet session on March 29, 2016, which
include lowering of the tax rate of income taxes, starting from accounting periods starting on or after April
1, 2016. In accordance with this, the statutory tax rate used to calculate deferred tax assets and deferred
tax liabilities is changed from the previous 32.31% to 31.74%. The impact from the tax rate change is
minimal.
35
SEMIANNUAL REPORT
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36
Nippon Prologis REIT, Inc.
Nippon Prologis REIT, Inc.
13. Per Unit Information
14. Transactions with Related Parties
a)
The following table summarizes per unit information for the six-month periods ended May 31, 2016 and
November 30, 2015.
Transactions and Account Balances with the Parent Company and Major Unit Holders
(For the six-month period ended May 31, 2016)
None
Yen
(For the six-month period ended November 30, 2015)
For the six-month periods ended
May 31, 2016
None
November 30, 2015
b) Transactions and Account Balances with Affiliates
Net income per unit
Basic net income per unit
¥
3,518
¥
1,777,885
Weighted average number of units outstanding
(For the six-month period ended May 31, 2016)
3,459
None
1,730,750
(For the six-month period ended November 30, 2015)
None
Yen
As of
May 31, 2016
Net assets per unit
¥
143,997
c)
November 30, 2015
¥
Transactions and Account Balances with Companies under Common Control
(For the six-month period ended May 31, 2016)
139,192
(Note) Basic net income per unit is based on the weighted average number of units issued and outstanding
during the period. Diluted earnings per unit and related information are not disclosed as no dilutive
Classification
Name of the
company
Address
Stated
capital
(Thousands
of yen)
Type of
business
Percentage
of voting
rights
owned
Relation
Common
board
member
Business
relationship
securities were outstanding.
Type of
transaction
Lease of
properties
in trust
Subsidiary of
an affiliate
Prologis
REIT Master
Lease GK
(Note 3)
Chiyoda-ku,
Tokyo
¥ 2,100
Real estate
business
-
-
Lessee
Proceeds of
tenant
leasehold and
security
deposits
in trust
Repayments of
tenant
leasehold and
security
deposits
in trust
Subsidiary of
an affiliate
Kitamoto
Special
Purpose
Company
Joso
Special
Purpose
Company
37
SEMIANNUAL REPORT
Tateyama
Special
Purpose
Company
Operating
accounts
receivable
¥ 377,440
Advances
received
2,500,964
Tenant
leasehold
and security
deposits in
trust
11,419,777
1,279,367
172,707
100,000
Real estate
business
-
-
Seller
Acquisition
of
beneficiary
right in trust
12,600,000
-
-
Chiyoda-ku,
Tokyo
100,000
Real estate
business
-
-
Seller
Acquisition
of
beneficiary
right in trust
7,120,000
-
-
Chiyoda-ku,
Tokyo
100,000
Real estate
business
-
-
Seller
Acquisition
of
beneficiary
right in trust
17,600,000
-
-
(Note 5)
Subsidiary of
an affiliate
¥ 14,265,380
Account
Ending
balance
(Thousands
of yen)
Chiyoda-ku,
Tokyo
(Note 4)
Subsidiary of
an affiliate
Transaction
amount
(Thousands
of yen)
SEMIANNUAL REPORT
38
Nippon Prologis REIT, Inc.
Nippon Prologis REIT, Inc.
(Note 3) With respect to 25 properties out of 29 properties held by NPR, NPR leases space to Prologis REIT
Subsidiary of
an affiliate
Subsidiary of
an affiliate
Zao
Special
Purpose
Company
Prologis REIT
Management
K.K.
Chiyoda-ku,
Tokyo
100,000
Chiyoda-ku,
Tokyo
100,000
Real estate
business
Investment
management
business
-
-
Seller
-
Executive
Director of
NPR and
President
& CEO of
the Asset
Manager
Acquisition
of
beneficiary
right in trust
Master Lease GK based on a pass-through type of master lease agreement, and Prologis REIT
4,820,000
-
-
Master Lease GK subleases the space to actual tenants.
d) Transactions and Account Balances with Board of Directors and Individual Unit Holders
Asset
Manager
Payment of
asset
management
fee
(For the six-month period ended May 31, 2016)
Accrued
expenses
1,495,492
1,387,575
None
(For the six-month period ended November 30, 2015)
None
(Note 1) The transaction amounts do not include the consumption tax whereas the tax is included in the
ending balance.
(Note 2) The terms and conditions of these transactions were executed based on market practices.
(Note 3) With respect to 29 properties out of 33 properties held by NPR, NPR leases space to Prologis REIT
Master Lease GK based on a pass-through type of master lease agreement, and Prologis REIT
Master Lease GK subleases the space to actual tenants.
(Note 4) Kitamoto Special Purpose Company changed its trade name to Tsukuba Special Purpose Company
on March 15, 2016.
(Note 5) Joso Special Purpose Company changed its trade name to Norikura Special Purpose Company on
June 1, 2016.
(For the six-month period ended November 30, 2015)
Classification
Name of the
company
Address
Stated
capital
(Thousands
of yen)
Type of
business
Percentage
of voting
rights
owned
Relation
Common
board
member
Business
relationship
Type of
transaction
Lease of
properties
in trust
Subsidiary of
an affiliate
Prologis
REIT Master
Lease GK
Chiyoda-ku,
Tokyo
¥ 2,100
Real estate
business
-
-
Lessee
Proceeds of
tenant
leasehold and
security
deposits
in trust
Repayments of
tenant
leasehold and
security
deposits
in trust
Subsidiary of
an affiliate
Prologis REIT
Management
K.K.
Chiyoda-ku,
Tokyo
100,000
Investment
management
business
-
Executive
Director of
NPR and
President
& CEO of
the Asset
Manager
Asset
Manager
Payment of
asset
management
fee
Transaction
amount
(Thousands
of yen)
¥ 13,719,019
Account
Ending
balance
(Thousands
of yen)
Operating
accounts
receivable
¥ 361,217
Advances
received
2,306,443
Tenant
leasehold
and security
deposits in
trust
10,313,117
Accrued
expenses
1,319,454
340,689
329,016
1,221,716
(Note 1) The transaction amounts do not include the consumption tax whereas the tax is included in the
ending balance.
(Note 2) The terms and conditions of these transactions were executed based on market practices.
39
SEMIANNUAL REPORT
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40
Nippon Prologis REIT, Inc.
Nippon Prologis REIT, Inc.
suitable and appropriate for logistics centers.
15. Segment Information
a)
Overview of operating and reportable segments
b) Basis of Measurement for the Amounts of Income, Assets and Other Items of each Reportable
Segment
Operating segments are a component of NPR for which separate financial information is available
The accounting policies of each reportable segment are consistent with policies disclosed in Note
and whose operating results are regularly evaluated by the chief operating decision maker to make
2, “Summary of Significant Accounting Policies.” Reported segment income is measured on the
decisions about how resources are allocated and assess their performance. Consequently, each of
basis of operating profit, excluding certain corporate expenses (see reconciling items below).
NPR’s 33 properties is considered an operating segment. However, when properties share similar
Segment assets are measured on the basis of total assets, excluding certain assets (see reconciling
economic characteristics and meet other specific conditions, they may be aggregated for purposes
items below).
of reporting segment information. Therefore, NPR has two reportable segments (“global market”
and “regional market”) (*) which are based on the investing region.
c)
Information about Segment Results, Assets and Other Items
Thousands of yen
(*) NPR mainly invests in real estate whose main usage is logistics facilities and makes
investments by focusing on the area where the facility is located and their features. As for the
As of and for the six-month period ended May 31, 2016
investing regions, NPR seeks to build a portfolio which is not concentrated in a specific region
and invests in areas of Japan vital to trade and logistics. By dividing Japan into two areas of
“global market” and “regional market” and through investment into those two different
markets, NPR aims to build a portfolio which would minimize fluctuations in cash flows due
to regional economic shifts or localized impacts from natural disasters.
As for investment strategies in the “global market”, as such areas are vital for international trade
and logistics, NPR aims to invest in locations with the largest consuming areas which can also serve
as important hubs within the domestic logistics network. The “global market” is defined as the
Kanto area, which refers to Tokyo, Kanagawa, Chiba, Saitama, Ibaraki, Tochigi and Gunma
prefectures, and the Kansai area, which refers to Osaka, Hyogo, Kyoto, Nara, Wakayama, Shiga and
Mie prefectures, respectively.
As of May 31, 2016, NPR’s properties classified into the global market were as follows:
Prologis Park Ichikawa 1, Prologis Park Zama 1, Prologis Park Kawajima, Prologis Park Osaka 2,
Prologis Park Maishima 3, Prologis Park Maishima 4, Prologis Park Takatsuki, Prologis Park TokyoOhta, Prologis Park Zama 2, Prologis Park Funabashi 5, Prologis Park Narita 1-A&B, Prologis Park
Narita 1-C, Prologis Park Amagasaki 1, Prologis Park Amagasaki 2, Prologis Park Narashino 4,
Prologis Park Tokyo-Shinkiba, Prologis Park Yokohama-Tsurumi, Prologis Park Osaka 4, Prologis Park
Kawajima 2, Prologis Park Kitamoto, Prologis Park Joso, Prologis Park Osaka 5, Prologis Park Ebina,
Prologis Park Kawanishi, Prologis Park Amagasaki 3 and Prologis Park Kobe.
As for investment strategies in the “regional market”, as such areas are critical to Japan’s
domestic trades, NPR aims to invest in locations with the second largest consuming areas in Japan
to the “global market”, which can play a crucial role in a widespread regional logistics network. The
“regional market” is defined as the Chubu, Tohoku and Kyushu areas which refer to Aichi, Shizuoka,
Niigata, Toyama, Ishikawa, Fukui, Yamanashi, Nagano and Gifu prefectures; Aomori, Iwate, Miyagi,
Akita, Yamagata and Fukushima prefectures; and Fukuoka, Saga, Nagasaki, Kumamoto, Oita,
Miyazaki and Kagoshima prefectures, respectively.
As of May 31, 2016, NPR’s properties classified into the regional market were as follows:
Prologis Park Kasugai, Prologis Park Kitanagoya, Prologis Park Tagajo, Prologis Park Iwanuma 1,
Prologis Park Tosu 2, Prologis Park Tosu 4 and Prologis Park Sendai Izumi.
In addition, NPR is able to invest in areas besides the global market and the regional market to
the extent that such areas are adjacent to consuming or manufacturing areas, or such areas are
41
SEMIANNUAL REPORT
Global market
¥ 13,252,169
7,029,713
398,417,609
Regional market
¥
1,614,363
761,164
40,420,157
Reconciling
adjustments
¥
(502,089)
20,681,293
Amount on
financial
statements
¥ 14,866,532
7,288,788
459,519,060
-
3,129,190
-
43,159,578
Operating revenues (Note 1)
Segment income (Note 2)
Segment assets (Note 2)
Other items
Depreciation
2,731,431
397,759
Increase in property,
38,206,909
4,952,668
plant and equipment
and intangible assets
(Note 1) Operating revenues of NPR are exclusively earned from external parties.
(Note 2) Reconciling adjustments to segment income represent general corporate expenses that consist
mainly of asset management fee of 399,320 thousand yen, asset custody fee of 37,091 thousand
yen and directors’ compensation of 4,800 thousand yen. Reconciling adjustments to segment
assets consist mainly of cash and cash deposits of 17,325,968 thousand yen, consumption tax
receivable of 2,127,110 thousand yen, long-term prepaid expenses and security deposit of
910,269 thousand yen, organization expenses of 23,077 thousand yen, and Investment
corporation bond issuance costs of 21,834 thousand yen.
Thousands of yen
As of and for the six-month period ended November 30, 2015
Reconciling
adjustments
¥
(472,819)
20,610,474
Amount on
financial
statements
¥ 14,332,966
6,944,123
419,403,883
-
2,935,990
-
503,053
Global market
Regional market
Operating revenues (Note 1)
¥ 12,746,461
¥
1,586,504
Segment income (Note 2)
6,697,784
719,157
Segment assets (Note 2)
362,929,330
35,864,078
Other items
Depreciation
2,566,901
369,089
Increase in property,
plant and equipment
491,521
11,532
and intangible assets
(Note 1) Operating revenues of NPR are exclusively earned from external parties.
(Note 2) Reconciling adjustments to segment income represent general corporate expenses that consist
mainly of asset management fee of 382,228 thousand yen, asset custody fee of 35,796 thousand
SEMIANNUAL REPORT
42
Nippon Prologis REIT, Inc.
yen and directors’ compensation of 4,800 thousand yen. Reconciling adjustments to segment
assets consist mainly of cash and cash deposits of 19,579,530 thousand yen, long-term prepaid
expenses and security deposit of 744,774 thousand yen, organization expenses of 31,222
thousand yen, and Investment corporation bond issuance costs of 23,744 thousand yen.
Related Information
(For the six-month period ended May 31, 2016)
a)
(i)
Information by Geographic Region
Operating Revenues
Substantially all of NPR’s operating revenue is generated in Japan.
(ii)
Property and Equipment
Substantially all of NPR’s property and equipment is located in Japan.
b) Information by Major Tenants
Tenant
Prologis REIT Master Lease GK
Operating revenue
14,265,380 thousand yen
Related segment
Global market and Regional market
(Note 1) With respect to 29 properties out of 33 properties held by NPR, NPR leases space to Prologis REIT
Master Lease GK based on a pass-through type of master lease agreement, and Prologis REIT
Master Lease GK subleases the space to actual tenants.
(For the six-month period ended November 30, 2015)
a)
Information by Geographic Region
(i)
Operating Revenues
Substantially all of NPR’s operating revenue is generated in Japan.
(ii)
Property and Equipment
Substantially all of NPR’s property and equipment is located in Japan.
b) Information by Major Tenants
Tenant
Prologis REIT Master Lease GK
Operating revenue
13,719,019 thousand yen
Related segment
Global market and Regional market
(Note 1) With respect to 25 properties out of 29 properties held by NPR, NPR leases space to Prologis REIT
Master Lease GK based on a pass-through type of master lease agreement, and Prologis REIT
Master Lease GK subleases the space to actual tenants.
16. Subsequent Events
None
43
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SEMIANNUAL REPORT
44